Solar PV Electricity Can Be Competitive with Conventional Power in the Short-Term: KPMG Business Analysis for Greenpeace

14 September 1999

London -- Solar energy could become competitive in the short-term with conventional electricity, according to a report by business consultants and accountancy firm KPMG, commissioned by Greenpeace.

The KPMG report, "Solar Energy: from Perennial Promise to Competitive Alternative" [pdf, 236kb], calculates that one large-scale solar PV (1) factory which produces five million solar panels a year (equivalent to 250,000 homes, each with a two kilowatt system) could reduce the cost of solar power by a factor of four making it price competitive for domestic consumers with electricity produced from conventional sources.

A market for this level of production of solar panels would equate to; in the UK less than 0.3 per cent of existing roof area of domestic housing and less than 40 per cent for annual new properties, in the US 20 per cent of new housing and in the Netherlands 2 per cent of existing housing - equivalent to all new housing.

The report, commissioned by Greenpeace, examines whether large scale commercial production of solar PV cells could make the technology price competitive with conventional electricity and what level of investment or government regulation would be required to make this happen. Experts interviewed by KPMG during the compilation of the report came from Shell Solar, BP Solarex, Spire Corporation of the US (which build and supply PV manufacturing equipment) and the Dutch Energy Research Centre.

"The KPMG report demonstrates there are no major technological or financial barriers to creating a large scale solar PV industry. However there is market impasse," said Greenpeace renewable energy campaigner Karl Mallon. The report states: "It comes down to a classic chicken and egg problem: as long as demand is small, production of solar energy will remain small scale and expensive, and as long as production is small-scale and expensive, the price will remain high and the demand small: Catch 22".

"In order to get rooftop solar panels turned into a standard household appliance, governments needs to pull down the price by setting up a mass market, or industry needs to start low cost large scale manufacture," said Mallon. "However if governments and industry allow this gridlock to remain there is a real danger that the inevitable transition to a renewable energy and energy efficient economy will occur too late to avert dangerous climate change. Early action could make the transition smoother and less expensive."

The KPMG report points out that both industry or national governments are in a position to break the solar impasse, stating, "It is clear someone will have to bite the bullet and act".

The report estimates such a large scale solar PV factory would cost Euro 479 million (US$660 million or £320 million). This is equivalent to half BP's investment in the new Foinaven oil development in the Atlantic Frontier. In world terms the $660 million represents about half of one percent of the US$89 billion spent on exploration and production from new oil and gas reserves in 1998.

"Clearly the investment levels are minor for the many of the big oil and energy companies that own solar manufacturing. They have to ask themselves whether they are into solar power for the business or just for the advertising," said Mallon. "It would be a small step for government to initiate the transition by looking at solar power for the new housing market. In the next millennium every new home should be a solar home. It would be a win-win for the owners and the national governments which must meet international commitments to reduce greenhouse emissions."

Greenpeace has already begun campaigning to break the market deadlock on solar PV with a successful consumer campaign in the Netherlands which has resulted in 5,000 Dutch households now being installed with solar electricity systems. The Dutch Ministry of Economic Affairs and the Ministry for the Environment, which control building regulations, are currently assessing the KPMG report.